Ethiopia: Ethiopia - Turning Growth into Lasting Prosperity

Ethiopia has demonstrated that economic growth is possible, but the challenge now lies in sustaining this momentum amidst conflict and ensuring that growth translates into lasting prosperity. The country boasts a population of nearly 136 million people, making it Africa's second-largest, and achieved an impressive 9.2% GDP growth in 2024/25. However, per capita GDP remains low at around $979.

While Ethiopia's impressive growth is a testament to its industrial strategy, which is fundamentally an employment strategy, the country must now address the pressing issue of job creation for its youthful population. The African Development Bank estimates that 80% of Ethiopia's workforce is still engaged in low-productivity agriculture and informal services. To truly harness the potential of this vast workforce, Ethiopia must develop agro-industrialization, enhance connectivity, and increase competitiveness.

Energy could be a game-changer for Ethiopia's industrialization and export potential. The Grand Ethiopian Renaissance Dam, with an installed capacity of about 5,150 megawatts, symbolizes the country's energy ambitions. However, the dam is just one part of Ethiopia's broader energy strategy. Hydropower, solar, wind, and geothermal resources could support domestic manufacturing and even generate electricity for regional exports.

Additionally, the Ethiopia–Kenya Electricity Highway demonstrates how power trade can create an export industry and boost industrial activity across East Africa. Nonetheless, generating power is only the beginning; access to electricity and industrial supply networks are crucial.

Ethiopia's access to the Red Sea, primarily through Djibouti, plays a vital role in the country's competitiveness. The corridor's development is essential for reducing transportation costs and linking farms, factories, and industrial parks to global markets. If Ethiopia can enhance its transportation infrastructure, it could significantly boost its manufacturing prospects.

While industrial parks and manufacturing zones in textiles, garments, leather, footwear, food processing, pharmaceuticals, machinery, construction materials, and renewable-energy components have shown promise, Ethiopia must move beyond attracting isolated assembly operations. The government's five-million-coders programme aims to equip young Ethiopians with the skills needed for software, fintech, digital payments, business-process outsourcing, and other traded services.

This strategy is essential for harnessing Ethiopia's digital potential and accessing global markets.

However, the path to lasting prosperity is not without challenges. Conflict has caused immense human and economic costs, and investors require predictability, farmers need security, factories must function smoothly, and children require uninterrupted education. For Ethiopia to realize its scale advantage, political and ethnic tensions must be resolved to ensure a peaceful environment conducive to growth.

In conclusion, Ethiopia's journey from rapid growth to lasting prosperity hinges on creating jobs, enhancing energy access, improving infrastructure, and fostering a stable political environment. By addressing these challenges, Ethiopia can transform its economic momentum into a durable and inclusive prosperity for all its citizens.